The dairymen received letters from Dairy Farmers of America’s Dairy Marketing Services, dated May 15, informing them that the cooperative will no longer market the independent producers’ milk. The farmers will receive a six-month notice of termination.
The farmers will have the option of joining DFA or finding another market by Nov. 30, 2017.
This action will affect approximately 92 farms in Ohio; 85 farms in Indiana; 35 in Pennsylvania; six in New York; four in West Virginia; and one in Kentucky. These farms contribute roughly 10 percent of the milk marketed by DMS in Federal Order 33.
It does not affect any organic milk producers who market through DMS.
The announcement comes on the heels of a similar action in the Northeast in March that affected 900 independent milk shippers.
Can’t assess balancing costs
Dairy Marketing Services said growth in the region’s milk supply and declining consumer demand for fluid milk products has triggered a supply-demand imbalance, particularly in the eastern United States.
According to the USDA’s Agricultural Marketing Service, the total milk marketed in the Mideast marketing order (Federal Order 33) has increased nearly 27 percent in the past seven years, from 1.45 billion pounds in April 2010 to 1.84 billion pounds in April 2017.
In the Mideast area, Dairy Marketing Services manages and markets milk for some independent producers. However due to federal order blend price payment rules, the balancing costs to move excess milk can only be charged to co-op members. For example, since July 2014, DFA members have been assessed a marketing adjustment charge that is recalculated every month. It has been as high as 95 cents per hundredweight in the Mideast region.
“As a result,” the letter states, “we are unable to continue marketing your milk under the current DMS arrangement.” It was signed by Bill Cummings, chief operating officer of the DFA Mideast region.
There is no currently written contractual agreement between the co-op and independent farms.
If the producers join DFA, the co-op said it would waive a capital retain payment (equity investment of 10 cents per hundredweight of milk shipped) for the first year of membership. Co-op members get that investment back, based on a predetermined schedule, should they leave for another market, retire, or leave the dairy industry.
DFA will also allow these independent farms to terminate their co-op membership at any time during that first year, with 30 days’ written notice.
“We understand that there are limited options in the marketplace,” said Heather J. McCann, communications manager with DFA’s Medina, Ohio, office. “We’re not looking for anyone to lose their market.”
McCann said the co-op has been searching for ways to share marketing, transportation and other balancing costs fairly across the marketplace, “but there’s not a good mechanism to do so under the federal order, so we were looking for an alternative that would give producers an opportunity to continue in the marketplace.”
Nationally, DFA markets approximately 22 percent of the nation’s milk supply. There are nine other cooperatives serving various parts of the Mideast federal order.
Source: Farm and Dairy